The Sanctions Illusion

Obama has chosen to go after Putin’s cronies. But do sanctions ever really work?

On Monday, the Obama White House dropped another round of sanctions on some of Russian President Vladimir Putin’s cronies, but it’s not clear if this will affect Putin’s policies toward Ukraine.

Sanctions are a time-honored technique for punishing a leader who’s misbehaved, or deterring him from misbehaving further. The problem is, they're usually not very successful.

Obama’s sanctions against Putin are smarter than most. Rather than punishing a country’s entire population, like the Bush-Clinton sanctions against Saddam Hussein’s Iraq, Obama—assisted by David Cohen, the longtime treasury undersecretary for terrorism and financial intelligence—is aiming at the Russian officials who help make Ukraine policy, and at the Russian institutions that profit from it. (They’re not aimed at Putin’s own fortunes, by the way, as it’s long been considered a bad idea to go after the holdings of a foreign leader, if just because the blowback could be fierce.)

Let’s stipulate that Putin’s cronies are hurting, even yelping. Certainly the financial world in which they operate is feeling the blow. According to White House officials, capital is flowing out of Russia (already $60 billion more this year than all of last year); the ruble is tanking (it’s the emerging market’s worst-performing currency); and the latest bonds, issued to cover Russia’s debt, had to be canceled for lack of buyers. So things are bad for Putin’s rich friends. But are they bad for Putin? Maybe, but probably not bad enough for him to give up his hopes and dreams about Ukraine.

Here’s the thing about cronies: Their power depends on which way the money flows. During the Kosovo conflict in the 1990s, U.S. and British intelligence agencies messed with the financial holdings of Serbian leader Slobodan Milosevic’s cronies, and the tactic worked—Milosevic suddenly found himself isolated—because the cronies had put him in power. But Putin’s cronies were enriched and empowered by Putin. Maybe at some point they’d turn against him if things got really bad. But for the short-to-medium term he holds the cards.

It’s illusory to think that these or any other sanctions will have more than a marginal impact on Putin’s behavior.

Iran is seen as the modern poster child of a successful sanctions campaign. President Hassan Rouhani probably wouldn’t have agreed to negotiate an accord on Iran’s nuclear program had it not been for the miserable state of Iran’s economy, much of which was due to decades of Western sanctions.

However, sanctions weren’t the only reason for Iran’s sudden shift to diplomacy. Another big reason was Obama’s announcement—right before Rouhani’s move to the table—that Iran would be allowed to enrich uranium to some degree. (Until then, U.S. policy was to condemn any and all enrichment.) Nor were the sanctions the only cause of Iran’s faltering economy; another huge factor was the horrendous mismanagement and corruption of Rouhani’s predecessor, Mahmoud Ahmadinejad.

Advertisement

To the degree sanctions worked in Iran, it was because they were combined with self-inflicted economic damage, a major change in Iran’s political leadership, and a significant diplomatic inducement from the United States.

Even so, a new study by the Congressional Research Service notes the sanctions had an effect only on Iran’s nuclear program. Other sanctions, going back more than a decade, had been imposed with the intention of halting Iran’s support for Middle Eastern terrorist movements. Those sanctions had, and continue to have, no effect whatever.

That isn’t to say there’s no place for economic sanctions. Sometimes, as with South Africa’s apartheid system, sanctions are worth imposing on moral grounds. And, in that case, because the sanctions were so deep, widespread, and long lasting, they finally paid off.

In this sense, sanctions against Russia are worthwhile, too. First, the West has to do something about Putin’s incursions and threats in Ukraine, and the fact is, there’s not a lot it can do. Second, if Putin isn’t determined to invade Ukraine outright, the pain of the sanctions to date—and the threat of more pain to come if he escalates—might affect his calculations on the costs of going ahead and the benefits of keeping still.

Advertisement

However, it’s illusory to think that these or any other sanctions will have more than a marginal impact on Putin’s behavior, especially when it comes to Ukraine, which has been integral to Russia—as a market, a supplier, and a security buffer—for centuries. If Putin decided that it was in his vital interest to chop off eastern Ukraine and call it a part of “New Russia,” then no economic sanctions—none that the United States and Western Europe can plausibly impose—would dissuade him from doing so.

Top Comment

Two major flaws with Kaplan's thinking: 1. He automatically assumes it is our (the US) responsibility, obligation, and even manifest destiny to control Putin's behavior. More...

The risk is that Obama and his aides sometimes talk as if the reality were otherwise—as if the sanctions could have some huge effect or as if they were the centerpiece of U.S. policy. Just in case Putin is entertaining the idea of invading Ukraine or annexing its eastern provinces, it’s important that he also be mulling a very dark vision of what might happen to him if he does. And Obama has to be the one to plant that vision. Deeper, bigger sanctions aren’t quite dark enough—especially since Putin might have good reason to doubt that the Western Europeans, who still rely on Russia for a lot of energy and trade, would go along. And if the Western Europeans don’t go along, then these deeper sanctions are mere theater.

Sanctions are part of the answer. Military action is another (though not NATO combat troops in Ukraine—forget about that). But so is a vision of what happens after Ukraine’s May 25 elections and of how the United States, the European Union, and Russia can cooperate to get Ukraine back on its feet. Yes, this crisis is about American will and determination (the rest of the world is watching, and all that), but it’s fundamentally about Ukraine. And, as even Timothy Garton Ash—that great journalist and advocate of a free and united Europe—has acknowledged, there’s no way Ukraine can be healthy, economically or politically, without a treatment that takes into account European and Russian interests.